Understanding “strategy”

Have you ever been half way through a conversation with someone and suddenly realised that the thing you thought you were discussing is not what they thought they were discussing, or vice-versa?

There’s usually a pause, a confused look, a question or two on either side, then a laugh as you both realise that you’d got your wires crossed and in fact were talking about two different things. It’s easily resolved eh? You’re able to quickly clarify the point and move on together along common ground with no damaging consequences as a result.

Over the past few months I’ve been engaging in many discussions on the subject of strategy, both on-line and in person. At least, that’s what I thought I was engaging in, but now I’m not so sure. So, I guess this is what has prompted me to write this article.

There’s something about the whole subject of “strategy” that seems to stir the emotions and give rise to multiple interpretations of the same. It’s almost like “strategy” is some really clever thing to know or do and everyone wants to put their own little spin on it, to further mystify it perhaps, or maybe to own a little piece of it for themselves?

A job that has responsibility for “strategy” is perceived by some as being sexier than one that doesn’t. It suggests that one has to use one’s brain a bit and flex the intellectual muscles. It is suggestive of prophetic powers – an ability to see into the future, to anticipate change and plan in advance to take advantage of it. It may even be seen as something that is gifted only to a few talented individuals.

However, I don’t think it is quite as esoteric as this, appealing to the ego though that may be.

We should probably define what we are talking about when we refer to “strategy”. This is the first stumbling block in achieving a common understanding.

“It’s almost like ‘strategy’ is some really clever thing to know or do and everyone wants to put their own little spin on it…”

Some people appear to think “strategy” is “what” we are hoping to achieve. Some think it is a specific thing that we are going to do. Some appear to confuse it with tactics or activities.

Whenever one is in doubt about the meaning of a word it is more reliable to turn to a robust reference source, like a dictionary or thesaurus, than some business guru’s interpretation in their latest book. At least that will give the original intended meaning, the plain-vanilla option. And from there you can decorate it all you like – but underneath it remains the same.

And so to the word “strategy” which is simply defined as:

“a plan of action”

The origins of the word relate back to its first use in a military context where it was used to describe how an army would plan to go about defeating the enemy to achieve its military objective. The “strategy” didn’t go into great detail about exact numbers of men to be enrolled, or how many would be on foot, how many on horseback, what kind of guns or other weapons to be used. No, the strategy was a deliberately broad plan of action that described how one was intending to go about things.

The same definition applies in business. Disappointing though it may be for some, there’s nothing mysterious, sexy or prophetic about it. And it’s only “clever” if it works!

We have our objectives – those things we want to achieve – that are specific and quantifiable. We have our strategy – our broad plan which describes the general business direction we will take in order to achieve our objectives – and the finer detail of what we will do, i.e. tactics and activities, fallout from there.

As an example, I was reviewing the strategy of one of our leading pharma companies the other day. They have a solid base of business in established markets. This business is a significant revenue generator for them, however, the opportunities to grow this business further in those established markets is not so great. So, they have some strategic considerations to make:

1. Grow existing portfolio in established markets

2. Create new market opportunities for the existing portfolio in established markets

3. Introduce a new portfolio of products to established markets

4. Introduce the existing portfolio of products to new markets

5. Introduce both new and existing portfolio to new markets

6. Introduce both new and existing portfolio to new and established markets

The first option is described as a “market penetration” strategy. It aims to take increased market share in those markets and segments where the company already has a presence. This strategy would be appropriate where there is considerable opportunity for growth.

“The origins of the word relate back to its first use in a military context where it was used to describe how an army would plan to go about defeating the enemy…”

The second option is a “market expansion” strategy. The aim here would be to grow the market where they have a strong competitive position. If the competitive position is not so strong, then market expansion activity may not be appropriate as competitors may stand to benefit more.

The third option could be described as a “selective diversification strategy”. It aims to introduce new areas of business, where the company may not have such strong expertise, albeit in markets which they are otherwise familiar with.

The fourth option is an “emerging market” strategy. This is a very “in-vogue” strategy in pharma currently. Assuming it is cost and risk effective to do so, it should bear additional revenue growth. But it doesn’t necessarily address the revenue issue in established markets or guarantee that the additional revenue from new markets will compensate for the same.

The fifth option is a hybrid of options 3 and 4 and could be described as an “expanded diversification strategy”. It assumes that there would be a reason why established markets would not be a focus for introduction of new business.

And finally, the sixth option could be described as a “broad diversification strategy” which aims to capitalise on existing and new areas of business across all markets.

A key question to be answered when deciding which strategy to pursue would be one of capabilities. For example: if a company is going to diversify away from its core business and core markets then it needs to have, or acquire, the capability to do so. This is not a “business as usual” situation.

Inherent in all these strategies is an element of risk. And whilst it may seem like the final option, a broad diversification strategy, carries the most risk, this isn’t necessarily the case.

“Inherent in all these strategies is an element of risk.”

Indeed, if opportunities in established markets and segments are severely limited then one could argue that the riskiest strategy is the first one, to rely on growth coming from the existing portfolio.

The list isn’t exhaustive of course – and I use it merely as an illustration of what we mean when we speak, in broad terms, about “strategy”.

You can of course have more than one strategy at the corporate level.

The company I refer to has a stated corporate strategy as follows:

? Grow a diversified global business

? Deliver more products of value

? Simplify the operating model

These strategies do not conflict because they are addressing different parts of the business. In fact, they should have synergy with each other. This strategy describes how the company plans to set about achieving its objectives.

The hard bit comes next – the execution of the strategy. For sure, if the strategy is taking the company in the wrong direction, no matter how good the execution, it cannot succeed.

And unlike the conversation, where we realise half-way through that we are on different tracks and can quickly become aligned again, getting the strategy wrong is not such a quick fix, it has long-lasting consequences, and is not usually resolved with laughter!

He has over 20 years experience in the pharmaceutical and biotech industries and has held senior level positions in sales, sales training, business development, country management and marketing. Most recently Pete was Senior Marketing Director at Wyeth, now Pfizer. His specialist areas of interest are strategic marketing, including e-marketing and the use of social media, and emerging markets.